UK prime yields tighten as competition heats up - C&W

UK prime yields fell 11 basis points last month as the competition to buy heated up, according to research from Cushman & Wakefield.

This was the largest month-on-month fall for prime yields since 2010, the adviser said. Downward pressure remains strong, and in fact is at its most intense since late 2009 when the recovery first started after the credit crunch.

As a result, the premium in property to bond yields is being squeezed and now stands at 300bp. But although this is the lowest it’s been since August 2011, it is still 'comfortably' ahead of the 10-year average of 1.9%, the report said.

Investment demand is in fact reported to be strong or rising in most prime and now secondary market segments. Supply patterns meanwhile are more mixed, with some areas of improving availability, notably in parts of the retail sector, but most supply increases linked to the secondary rather than the prime market.

In the finance sector, tmore active players are emerging and debt availability and costs continue to grow more supportive as a result. More lenders are focussing on the secondary market because of overcrowding in the prime segment, however. This is being paralleled by a general willingness to take on more risk, potentially including more development finance.